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What Leasehold Property Criteria is Acceptable to Equity Release Companies

Friday, October 18th, 2013

Equity release on leasehold propertiesWhen meeting new clients who are interested in releasing equity from their home, I’m often asked whether equity release companies will accept leasehold properties. The answer is more often than not…yes, however with certain caveats.

 

Around 2 million properties are currently owned on a leasehold basis in the UK. These leases are often originally set to 99 years or 999 years from the date the lease was set up. Older properties in the UK tend to have leases arranged to expire in 999 years, whilst new builds or retirement developments are usually shorter and can be typically around 99 years+. Typically flats tend to be leasehold, as freehold flats do incur issues with ownership, particularly when there is more than one floor.

 

Equity release providers usually require a minimum of 75 unexpired lease years in order to qualify for an equity release scheme. Just Retirement and more2life insist on a minimum of 75 years. Likewise LV= and Aviva equity release like to see 80 years left on a lease while Hodge prefer 90 years of unexpired lease years.

 

For properties built with a 999 years lease, these don’t usually cause any problems at all as they are unlikely to expire within one’s lifetime! However, for properties arranged on a 99 year lease, it may mean that the lease has reduced below 75 years depending on when the property was built. For equity release purposes this is where problems can arise as if the remaining leasehold term is below the lenders minimum then action needs to be taken.

 

In this instance, there are two possibilities: –

  1. It may be possible for you to buy the freehold. Further good news is that the cost of acquiring the freehold can be paid for from the proceeds of the equity release application.
  2. Extend the lease for a term of 90 years on top of the unexpired term of the existing lease.

 

Both the aforementioned solutions will not only enable meeting the criteria for the equity release companies, but also will invariably add value to your property. Basically, as the term of a lease reduces, it can have an impact on the property value and can be especially significant with expensive leaseholds in London.

 

The legal paperwork necessary to either extend or buy the lease is relatively straightforward and is done by the same solicitor who is acting on behalf of the equity release client. Ashford’s solicitors specialise in leasehold extensions and freehold purchase. They are one of the former members of ERSA (Equity Release Solicitors Alliance).

 

Peter Barton, a partner at Ashfords said “I have seen over recent years an increase in the number of clients using equity release to extend their lease. Whilst the process may appear daunting we at Ashfords can take you through the process at the same time as dealing with the equity release, and it can be timed to complete at the same time.”

 

Additionally Peter Barton of Ashfords advises the following –

 

“We would always recommend speaking with your Landlord/Managing Agent to ascertain their costs in extending the lease. If those costs seem excessive it is always worthwhile speaking with any neighbours who may have extended their lease to see if they were charged the same, alternatively there are websites that contain calculators to give you an estimate of Landlord costs for extending the lease. We have found those very useful and have saved clients many thousands of pounds by enabling clients to negotiate with their Landlords.”

 

Leasehold properties can present a challenge with regards to applying for an equity release mortgage, however upon inspection of the deeds including the lease document can unravel the exact lease criteria. Additionally, by checking the lease can also clarify any unusual rules in relation to retirement properties or sheltered accommodation. These could include such clauses such as a sinking fund, where the freeholder can make provision for improvements or repairs, or even age restrictions on who can live there.

 

Other issues that leaseholders are obliged to pay for, & can be too prohibitive to some equity release companies, are the service charges.  These are often paid for via maintenance charges and are usually determined by the freeholder or their agent who can decide the work that needs to be done, who will does it and the ultimate cost. All these issues should be investigated beforehand, so that if issues do exist they can be resolved as part of the equity release process.

 

For any questions about leasehold properties or to check your eligibility for equity release, please contact Mark Rumney at Equity Release Supermarket on 07957 974826. Mark can also be emailed directly at markrumney@equityreleasesupermarket.co.uk

How Long Does the Equity Release Application Process Take?

Sunday, October 7th, 2012

The equity release market is currently at its peak with a record number of applications. For those aged over 55 and are considering releasing equity, here we review how the equity release application process works, how long it takes and the involvement required.

 

The equity release sales process is now the most streamlined since the product was originally conceived. Increased competition in the marketplace from new providers has resulted in equity release companies looking at ways to steal an advantage. As better interest rates for customers are now also on offer and today’s equity release plans are much more flexible than those available until a few years ago, never has there been a better time to consider a release of equity for the over 55’s.

 

Timescales

An equity release application usually takes somewhere between 6 to 8 weeks for a lifetime mortgage scheme and 10 to 12 weeks for a home reversion plan, assuming the title on the house is clear. The actual amount of time your equity release process takes, also depends largely on how efficient and experienced your solicitor is. Applying for equity release involves legal paper work, which needs to be handled by a solicitor and solicitors with expertise in equity release plans can help to avoid any potential delays in your application.

 

The First Steps

The whole process starts with completion of an application form which must come in conjunction with financial advice as NO equity release provider will accept an application without it. At this stage any fees required which would be clearly stated in the Key Facts Illustration (KFI) would need to be paid. Normally this would include the valuation fee made payable to the lender. Some equity release brokers do charge an advice fee on application; however Equity Release Supermarket would only charge their advice fee upon completion, so beware of paying unnecessary upfront fees.

 

Valuation

On completion of the application form, it is then submitted to the equity release provider who will instruct a local surveyor to complete a basic valuation on the property. The role of this surveyor is to complete a report which will advise the current market value based on a relatively quick sale. The surveyor’s role will be to assess the local proximity to the property and establish similar properties and the price they had sold for within the last 3-6 months. Additionally, the surveyor will ascertain whether any essential repairs will be needed should the property have material defects that could affect the long term structure or re-saleability of the property.

 

Legalities

At the same time as application submission, for speed of completion it is wise for the legal process to get underway. Unless a client specifically requests to use their own family solicitor, we would recommend an equity release solicitor from ERSA (Equity release Solicitors Alliance). One of the former members of ERSA is Goldsmith Williams, whose organisation offers a fixed fee agreement with Equity Release Supermarket clients of £395 +VAT & disbursements. Additionally, these solicitors will provide a ‘no completion, no fee’ agreement with our clients which should be considered for any future lifetime mortgage or home reversion application.

 

The solicitor’s role

Two sets of solicitors must be in place to carry out the whole process. Under Equity Release Council (formerly SHIP) rules different solicitors must be employed on behalf of the client and the lender. Once instructed by the client or broker, the solicitor acting on behalf of the client will send out an initial questionnaire requesting further information. This will include a request for information on whether any mortgage exists currently, the owners to the title, any restrictions, further tenants or major improvements that have been carried out with respective planning permissions. This questionnaire also provides the permission for the prospective solicitor to act on their behalf.

 

What about existing mortgages or secured loans?

Should any existing charges by way of mortgages or secured loans be present on the title deeds then they must be removed prior to, or upon completion. Any mortgage will usually be settled by the proceeds from the equity release scheme at funds release stage. However, another role of the solicitor will be to establish exactly how much will be required on the proposed completion date. This will be achieved by requesting a redemption statement from the mortgagee, who will provide the current balance and the daily accrual rate of interest being added during the interim period to completion date.

 

Provider requirements

For an application to proceed through to completion, the lender will carry out certain checks to meet money laundering and the consumer credit act requirements. This will be proof of ID including passport, driving licence or government backed evidence such as your annual state pension letter or Inland Revenue tax code notification. Should none of these be available most lenders will also require a birth and/or marriage certificate as satisfactory proof of who you are. Additionally, proof of address will be required, so a recent utility bill or bank statement will be necessary.

 

Equity release and adverse credit

Some lenders will carry out credit checks. You may ask why this would be necessary as NO monthly payments are usually required with a lifetime mortgage scheme. The lenders view is that if someone has been negligent with previous credit payments, then there may be a tendency to not look after their property, thus affecting the lenders security.

 

Nevertheless, there would have to be severe credit problems for a lender to decline an equity release application due to adverse credit. Most lenders will accept previously missed payments, defaults and even CCJ’s (County Court Judgements) on their credit file, unless they are significantly large. Even then, most lenders such as Stonehaven will accept the application as long as the applicant has been forthcoming with an explanation as to why the CCJ’s had been applied. Undischarged bankrupts would usually be unsuccessful with any equity release borrowings.

 

Latter stages

Upon successful valuation and title checks, the solicitor acting on behalf of the client will set the completion date. Once your equity release scheme has gone through, you can receive the money by having it paid directly into your nominated bank account, or if you wish to save the telegraphic transfer fee (approximately £30), you can receive the funds in the form of a cheque. Depending on the particular scheme, money can be borrowed either as a one-off capital lump sum or by taking ad hoc withdrawals from a cash reserve set up from the outset.

 

An equity release plan can be a great way to turn the equity tied up within your estate into something tangible and usable. But like any large loan, it has its own risks. Therefore, before you decide to release equity from your home, make sure you speak to your solicitor or independent financial adviser first.

 

Companies such as Equity Release Supermarket provide the ‘complete equity release service’ whereby we provide guidance to clients from the start to finish of the application process. If you have any questions with regards to the equity release application process please call 0800 678 5159 where a qualified adviser can discuss your requirements.

 

Common Questions Asked About Equity Release

Friday, August 13th, 2010

There is no doubt historically, that buying property long term has been a profitable investment.

This phenomenon is now becoming of great assistance to people nearing retirement and needing an additional source of income to help live comfortably. Older homeowners now have the option to free up money from their home to gain a steady income. This can be done though equity release schemes which enable homeowners to release accumulated equity in their property.

 

Why would people want equity release?

The main reason to opt for this process is to free up money in a property. This money can be used to accomplish a number of purposes. While some homeowners prefer to use the money on daily expenses to make their lives better, others use it for taking holidays or to buy personal items they want or need. Regardless of the need, equity release calculators can help analyse & work out how you can achieve this quickly and easily.

 

Is it an ideal option?

Equity release can be an ideal way for retired people to get a certain percentage of income from their properties. However, the convenience of this option differs from person to person. While some people prefer to get regular payments from their homes without moving out, there are others who would want use their property to get a large tax free lump sum.

 

Do I need legal advice?

This is one of the most common questions people ask themselves when asking about equity release. Although it sounds like a fairly simple process, it is best to have a professional overseeing the process. This will ensure the scheme is suitable and beneficial for you. One of the aspects the solictor must undertake to comfirm he/she is satisfied the client understands the contract they are entering into, is the signing of the SHIP certificate.
This confirms the solicitor has discussed the equity release scheme with the client, & is happy, that they are happy, with the process & legal implications of taking out equity release form the property.
Equity Release Supermarket can recommend a solicitor who is a member of ERSA. This is an alliance formed between a group of established law firms that specialise within the field of equity release. These solicitors aim to promote the importance of specialist equity release legal advice within the equity release marketplace.

 

To find a solicitor who can act on your behalf contact the Equity Release Supermarket team on 0800 678 5159.

 

How To Minimise The Setting Up Costs Of An Equity Release Plan

Monday, January 4th, 2010

Keeping the initial equity release set up costs down to a minimum will be of great benefit in maximising the gross release from the lender… & in turn your pocket.

 

It will also have an immediate impact on the APR (annual percentage rate) of the equity release scheme in that the lower the set up costs, the lower the APR. Traditionally, there are four main associated costs involved: –

  • Valuation Fee
  • Lenders Application Fee
  • Solicitors Fees
  • Adviser Fee

These will be discussed in turn & assistance given on where to look for potential savings.

 

  • Valuation Fee – paid upon application & can vary significantly from lender-to-lender.

The fee as with any mortgage is directly related to the property value & can vary from a percentage of the property value to a banding system. One area of savings here would be in the banding system. First establish what the bands are from the potential equity release lender & ensure that you have not placed your property value into a higher band than required. Dropping to the one level below can save at least £30 – £100.

However, bear in mind the valuation of the property will affect the maximum release so don’t jeopardise this figure if you are looking for as much as possible. The biggest savings you can make is with a free or subsidised valuation which some independent brokerages like Equity Release Supermarket can obtain. Certain lenders will make these special offers from time to time & would result in NO upfront costs being incurred.

 

  • Lenders Application Fee – these are usually fixed no matter the size of the release or value of the property.

Some home reversion companies have no fee, as this is accounted for in the full or partial transfer of ownership. Lifetime mortgages application fees however can vary from £500 up to £695. Again, special offers can be made by lenders or even cash-backs can be obtained to reduce the net costs overall.

 

  • Solicitors Fees – due to the fact the solicitor can be selected, considerable savings can be made here.

Local or family solicitors can be contacted & a quote for equity release conveyancing requested. Borne within the quote would be the solicitors flat fee & any disbursements including VAT. Consider obtaining several quotes from solicitors or take the recommendation of your independent adviser as they may have special fixed cost arrangements with solicitors from ERSA (Equity Release Solicitors’ Alliance).

*Equity Release Supermarket has a fixed fee arrangement of £395 + VAT & disbursements with a leading equity release legal firm.

 

  • Advice Fee – dependent upon which brokerage advice is being sourced will determine how much the adviser is charging.

Care should be taken here. Fees of £1495 can be levied for taking out the same equity release plan as another brokerage charging only £595! Some companies will also charge an upfront fee, some will offer an initial consultation free of charge. Establish with the adviser how they are remunerated & shop around if you feel a better deal can be found elsewhere.

 

In summary, considerable savings can be made by conducting in depth research & dealing with a specialist independent firm of equity release advisers such as Equity Release Supermarket.

 

If you have any queries regarding equity release fees & costs, please contact Mark Gregory on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

 
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